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2017-07-17 - Improved Tax Exempt Calculations

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As of July 17, we've improved the way we calculate Tax Exempt Impact. Prior to this change, we calculated Tax Exempt Impact and factored it into Raw Interest Income, but we did not display it by itself in the Financial Statements.

For floating rate and adjustable rate loans on the Tax-Exempt Impact, we calculate using the Expected Customer Rate. The Expected Customer Rate is the future rate that the customer will likely pay as determined by the forward curve using the bank’s funding curve as the basis. The tax effect of expected customer rates is effected using the method discussed here: Tax Exemption Options for Loan Accounts. Typically, as interest rates rise the tax effects increase, while they decrease in a declining interest rate environment. The Tax Exempt Impact is calculated as the sum for each month of the product of the the Tax Equivalent rate less the Expected Customer Rate and the monthly average balance of the loan. The customer rates are adjusted based on the interest method chosen (Actual/360, or Actual/365).

The Tax Exempt Impact field has been added to both the Interest Income Breakdown in the Financial Statements and the Full Opportunity printout for all opportunities, including opportunities priced prior to this improvement. If the opportunity is not tax exempt, the field will show the Tax Exempt Impact as $0.



This only relates to U.S. based organizations lending domestically. These changes will only affect calculations on floating and adjustable rate loans, and they will not impact opportunities priced prior to this change, unless the pricing date is updated. For more information on calculations related to Tax Exempt loans, please refer to the PrecisionLender Engine Standard. To request access to the Engine Standard, please submit a support request with your name, email address, and the name of your organization and we will get back to you as soon as possible.

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